I was able to get it working by moving the selector inside it's own XML file and putting in res/drawable and then referencing that xml file as my resource for my imagebutton in the app-widget's layout xml.
buttonimg.xml:
<?xml version="1.0" encoding="utf-8"?>
<selector
xmlns:android="http://schemas.android.com/apk/res/android">
<item
android:state_pressed="false"
android:drawable="@drawable/button_off" />
<item
android:state_pressed="true"
android:drawable="@drawable/button_on" />
<item
android:drawable="@drawable/button_off" />
</selector>
widget_layout.xml
<ImageButton
android:id="@+id/buttonimg"
android:layout_width="50dp"
android:layout_height="50dp"
android:layout_x="0px"
android:layout_y="2px"
android:clickable="true"
android:src="@drawable/button"
>
I now have a different problem, however. The selector only allows me to change the image onPress. On release, the image changes back >:-(
How do I get the image state change on press and stay in that state until next press (like the ToggleButton)?